Canadian Dollar presents battle as USD shows weakness after mid-tier data

Canadian Dollar rises slightly against US Dollar following mixed economic data.
Soft US GDP growth and strong ADP Employment Change figure support the USD in Wednesday session.
NFP expectations point to a decline in payrolls due to hurricanes and Boeing strike, potentially weakening USD.

Patricio Martín FXStreet

The USD/CAD pair trades neutrally on Wednesday near 1.3915. The Canadian Dollar is gaining some ground against its US counterpart despite mixed economic data from the US. Softer Gross Domestic Product (GDP) growth than expected from Q3 and a strong ADP Employment Change report for October are moving the markets in Wednesday’s session.

However, Tuesday’s declining JOLTS Job Openings and expectations of a Federal Reserve (Fed) rate cut have weighed on the US Dollar. The release of the PCE Prices Index and Nonfarm Payrolls (NFP) report later this week is expected to provide further direction to the USD/CAD pair amidst ongoing market volatility.

Daily digest market movers: Canadian Dollar on neutral ground after US data

Strong October ADP employment data (233K vs. 115K expected) strengthens the US Dollar against the Canadian Dollar.
Q3 US GDP growth of 2.8% falls short of expectations but remains robust in the context of a global economic slowdown. The market had expected 3.0%.
JOLTS report on Tuesday showed a decline in job openings in September, raising concerns about the labor market and pressuring the US Dollar.
Futures markets now fully price in a 25 bps interest rate cut by the Fed next week with chances of a further cut in December easing.
Personal Consumption Expenditures (PCE) Prices Index expected to show continued easing of price pressures on Thursday.
NFP report on Friday expected to show a significant decline in new payrolls, potentially weighing on the US Dollar.
Bloomberg consensus for October NFP is 110K vs. September's 254K and a whisper number of 127k.

CAD/USD technical outlook: Bullish momentum remains, strong resistance at 1.3920

The Loonie’s Relative Strength Index (RSI) is in the deep overbought area at a value of 75 with a mildly declining slope, suggesting that buying pressure is easing. Also, the Moving Average Convergence Divergence (MACD) is flat and green, suggesting that buying pressure is at least neutral.

Buyers will potentially take a breather in the next session and use the 1.3900 support to consolidate the Aussie trade in the next few sessions.

Interest rates FAQs

What are interest rates?

Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.

How do interest rates impact currencies?

Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.

How do interest rates influence the price of Gold?

Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.

What is the Fed Funds rate?

The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.

Author

Patricio Martín

FXStreet

Patricio is an economist from Argentina passionate about global finance and understanding the daily movements of the markets.

GBP/USD trims gains, back to around 1.3500

GBP/USD now surrenders part of the earlier move to multi-week peaks around 1.3530 and comes close to the 1.3500 support on Monday. Cable’s uptick comes in tandem with decent gains in the Greenback, always amid persistent uncertainty lingering over the reopening of the Strait of Hormuz and US-Iran talks.

EUR/USD deflates to 1.1540

EUR/USD begins the week on the back foot, retesting the 1.1540 zone as the NA session draws to a close. The better tone in the US Dollar weighs on the risk complex, sparking the daily correction in spot, always on the back of unabated effervescence in the Middle East.

Gold clings to daily gains; focus is back to $4,400

Gold picks up pace and advances past the $4,350 mark per troy ounce, adding to Friday’s gains. That said, the yellow metal keeps pushing harder despite the better tone in the US Dollar, and is closely following the Fed’s interest-rate outlook as well as developments in the Middle East

Bitcoin vs Gold Overview: XAU tests breakout, BTC slides as Trump claims Iran negotiations

The cryptocurrency market shows signs of trimming gains accrued last week as Bitcoin (BTC) slides below $65,000 at the time of writing on Monday. Meanwhile, Gold (XAU/USD) maintains a bullish outlook, hovering above $4,350.

US Payrolls miss – RBA on deck tomorrow

It would be remiss of me not to kick off this morning’s report with a rundown of last Friday’s US jobs report, which was a belter. Headline payrolls fell by 23,000, versus expectations of an 80,000 gain. The BLS noted that May was revised down by 66,000 (from 129,000) and June by 37,000 (from 57,000), resulting in combined May-June revisions of 103,000 lower than previous reports.

9-3: Is the Federal Reserve’s vote tally Warsh's new forward guidance?

The rate did not move. Neither did the statement, and that’s the more interesting fact. Set the July 29 Federal Open Market Committee (FOMC) statement beside the one issued on June 17, and the two documents are identical apart from a single verb and a paragraph at the bottom naming three dissenters.